Bond Pricing Between Coupon Dates (Solved Example)(CFA Level 1, FRM Part 1 Valuation & Risk Models)

[@finRGB]

*FRM Learning Objectives* 1) Differentiate between “clean” and “dirty” bond pricing and explain the implications of accrued interest with respect to bond pricing. 2) Differentiate between the clean and dirty price for a US Treasury bond; calculate the accrued interest and dirty price on a US Treasury bond.

[@cellosoft8020]

Very Helpful for students !!

[@nicholasborelli275]

An excellent explanation. Thank you.

[@gokuvegeta9500]

Great video Just 1 thing at 10:08 When you hav the expression with the brackets the last 3 should be 103

[@gokuvegeta9500]

12:52 How is N=3 ? If we are at the morning of 15th Nov 2020 we haven't yet received the coupon payment of 15th November 2020 So shouldn't N=4 ? Edit:You included the 3$ payment later at 13:21

[@YappyGlenn]

Hello. Thanks for the explanation. At minute 09:20, if you change your YTM to 6% (same as the annual coupon), why does the dirty price not equal 100?

[@finRGB]

Hello Glenn, if coupon = YTM, dirty price of 100 will happen when you're positioned on a coupon date (and the coupon for this date has already been paid out).

[@luismarc5521]

Where did the 0.344 come from? In 15:12

[@finRGB]

We are following the 30/360 day count convention here. There are 62 days between 15 May 2020 and 17 Jul 2020 as per this convention. 0.3444 is simply 62 / 180 i.e. fraction of the coupon period that has already elapsed.